Tag: yield

U.S. government debt yields fell on Tuesday as investors fled riskier assets and geared up for a key Federal Reserve meeting. The yield on the benchmark 10-year Treasury note sank to 2.825 percent while the yield on the 2-year Treasury bond, the coupon maturity most sensitive to Fed policy expectations, dropped to 2.652 percent. Bond yields move inversely to prices. The big news for traders this week is the Federal Open Market Committee’s (FOMC) upcoming meeting, where the central bank will set

U.S. government debt yields fell on Tuesday as investors fled riskier assets and geared up for a key Federal Reserve meeting.

The yield on the benchmark 10-year Treasury note sank to 2.825 percent while the yield on the 2-year Treasury bond, the coupon maturity most sensitive to Fed policy expectations, dropped to 2.652 percent. Bond yields move inversely to prices.

Stocks have suffered wild bouts of volatility as of late, with the S&P 500 dipping as much as 2 percent on Monday, marking a new low for the index. Major indexes pointed to a marginal recovery on Tuesday however.

The big news for traders this week is the Federal Open Market Committee’s (FOMC) upcoming meeting, where the central bank will set interest rates. The central bank is widely expected to hike rates on Wednesday, however expectations for further rate hikes in 2019 have dampened amid concerns of a potential slowdown in economic growth.

“With one day left to wait on the Fed Rate Decision, it has gotten hard to figure out what the FOMC will do, and even more importantly, what the market wants the FOMC to do,” Kevin Giddis, head of fixed income capital markets at Raymond James, wrote Tuesday.

“The bond market has taken the stance that the Fed has already missed its forecast on inflation, so this must be about keeping the economy from overheating, correct? That works except for the fact that the U.S. economy’s main data pints are getting weaker, rather than stronger,” Giddis added.

Hunter was among the 12 percent of respondents who think the Federal Reserve, after hiking in December, would next move to reduce the Fed Funds rate and do so by October. While the percentage is small, no forecasters predicted a 2019 rate cut in the September survey. Just under 60 percent say the current low level of the spread between the yields on the 2-year and 10-year notes does not signal a recession. Asked how different factors have contributed to the recent sell-off, respondents named “ta

“Traditional signals of a U.S. recession from the shape of the yield curve to a fall in housing investment to corporate bond spreads are suggesting a recession in late 2019/early 2020,” wrote Constance Hunter, chief economist at KPMG, in response to the survey.

Hunter was among the 12 percent of respondents who think the Federal Reserve, after hiking in December, would next move to reduce the Fed Funds rate and do so by October. While the percentage is small, no forecasters predicted a 2019 rate cut in the September survey.

And while the tone of responses is more negative, 63 percent of those surveyed believe the recent market sell-off reflects too pessimistic a view of the outlook, with about a third saying the market has it right. Just under 60 percent say the current low level of the spread between the yields on the 2-year and 10-year notes does not signal a recession.

“Market growth signals right now are out of line with economic fundamentals on our reading of both,” wrote John Ryding, chief economist at RDQ. “A resolution of trade uncertainty should encourage corporations to respond more strongly to the tax changes of December 2017 and boost capex.”

But Jim Bianco, president of Bianco Research, said the yield curve is “a signal the Fed is too tight and the risk of breaking the economy is rising.”

Asked how different factors have contributed to the recent sell-off, respondents named “tariff concerns” as the most significant followed by worries about global economic weakness and more Fed rate hikes.

Sixty-seven percent expect that the current trade talks between China and the U.S. will end on March 1 with an agreement to continue talking and without the imposition of additional tariffs. On average, however, the group expects tariffs to subtract 0.2 percent from growth in 2019, double the estimate from the September survey.

U.S. government debt yields slipped on Monday amid ongoing concerns around a potential slowdown in economic growth and ahead of the Federal Reserve’s December meeting. The yield on the benchmark 10-year Treasury note was slightly lower, trading at 2.868 percent, while the yield on the 30-year Treasury bond fell to 3.124 percent. Bond yields move inversely to prices. Market focus is largely centered on fears around slowing global growth, following the release of weaker-than-expected data from Chi

U.S. government debt yields slipped on Monday amid ongoing concerns around a potential slowdown in economic growth and ahead of the Federal Reserve’s December meeting.

The yield on the benchmark 10-year Treasury note was slightly lower, trading at 2.868 percent, while the yield on the 30-year Treasury bond fell to 3.124 percent. Bond yields move inversely to prices.

Market focus is largely centered on fears around slowing global growth, following the release of weaker-than-expected data from China and Europe on Friday.

Chinese industrial output for November grew 5.4 percent from the previously year, lower than an estimated 5.9 percent, while retail sales rose 8.1 percent last month, falling short of an expected 8.8 percent. European data also disappointed, with the IHS Markit Flash euro zone PMI index falling to 51.7 in December, at its lowest level in four years.

The figures for China particularly weighed on market sentiment, given the unresolved trade war between the U.S. and China. The two nations are attempting to settle their differences within a 90-day truce.

U.S. government debt prices rose on Friday as traders digested fresh economic data out of China and looked ahead to next week’s Federal Reserve meeting. The yield on the benchmark 10-year Treasury note fell steeply to 2.875 percent, while the yield on the 30-year Treasury bond dropped to 3.136 percent. Bond yields move inversely to prices. Investors turned their attention to worse-than-expected Chinese data. News of the disappointing figures comes as China and the U.S. try to negotiate a trade d

U.S. government debt prices rose on Friday as traders digested fresh economic data out of China and looked ahead to next week’s Federal Reserve meeting.

The yield on the benchmark 10-year Treasury note fell steeply to 2.875 percent, while the yield on the 30-year Treasury bond dropped to 3.136 percent. Bond yields move inversely to prices.

Investors turned their attention to worse-than-expected Chinese data. The country’s industrial output in November grew 5.4 percent from the previous year, less than the 5.9 percent estimated by Reuters; retail sales, meanwhile, rose 8.1 percent last month, falling short of an expected 8.8 percent.

News of the disappointing figures comes as China and the U.S. try to negotiate a trade deal within a 90-day tariffs truce. Positive headlines around trade relations between the two had buoyed market sentiment earlier this week.

President Donald Trump said discussions with Beijing had been “very productive” and that some “important announcements” were forthcoming, while a Wall Street Journal report said China was preparing to widen foreign access to its economy.

Wall Street angst over a possible recession may be increasing, but one bull refuses to waver. Federated Investors’ Steve Chiavarone believes there’s nothing on the horizon that suggests the 2018 market corrections will become a massive downturn next year. Rather, he sees stocks hitting fresh record highs — citing labor market trends, inflation levels, the Treasury yield curve and credit spreads as key factors contributing to a favorable economic and market environment. “We don’t have any of the

“We don’t have any of the early signs of recession. Yet, we have a market where despite 20 percent earnings growth, the P/Es [price-earnings ratios] have fallen 20 percent,” the fund manager said on CNBC’s “Trading Nation” on Friday. “What that tells us is the market is pricing in recession in 2019. We just don’t think that is going to happen.”

Yet, it appears the Street isn’t convinced.

The major indexes ended the week deep in the red, with the Dow plummeting almost 500 points on Friday mainly due to global growth jitters. It’s now off 2.5 percent so far this year.

The S&P 500, which closed at its lowest level since April, is off more than 12 percent from its all-time high of 2940 hit on September 21 and 2.75 percent for 2018.

After spending 2.6 trillion euros, the ECB is expected to end the plan and perhaps clarify when it might begin to raise its still-negative interest rates. It is on track to raise rates starting in the second half of next year. The ECB meeting comes a week ahead of the Federal Reserve’s December meeting, where it is expected to raise interest rates one-quarter point. ECB President Mario Draghi speaks at 8:30 a.m. “Draghi is pinning his hopes on their labor market,” Chandler said.

The Fed looks set to shift into a lower gear when it comes to rate hiking, and now markets want to make sure Europe’s central bankers aren’t going to drive too fast as they approach the off ramp for their own easy money program.

The European Central Bank meets Thursday and is expected to declare the official end of its quantitative easing program, launched in March 2015 to save the economy from deflationary forces and the residual effects of the European debt crisis.

After spending 2.6 trillion euros, the ECB is expected to end the plan and perhaps clarify when it might begin to raise its still-negative interest rates. It is on track to raise rates starting in the second half of next year.

The ECB meeting comes a week ahead of the Federal Reserve’s December meeting, where it is expected to raise interest rates one-quarter point. But the future expectations for the Fed have changed dramatically in the last several weeks, with economists no longer expecting an automatic quarter-point hike in March given market turbulence and signs of slower growth.

Futures markets have priced in less than one hike for next year, after next week’s widely expected hike.

The Fed has forecast three hikes for 2019, but Fed watchers say it could reduce its forecast based on recent dovish comments from Fed officials and a more tempered view of the economy for next year.

“It’s one of the most extreme sentiment shifts I’ve seen with no data to support it. It’s just that the equity market has gone down. I think the Fed wants to say we’re going to be more data dependent and they certainly don’t want to rule out March,” said Jens Nordvig, CEO of Exante Data.

That shift in Fed expectations raises the stakes for the ECB, which has to downgrade its own view of the economy but not so much to raise doubts about its exit from QE.

It also comes at a difficult time for Europe, as Italy struggles with its budget, and France’s president strained his own budget by upping payouts to pensioners and low income workers, in an effort to end violent ‘yellow vest’ protests. Compounding Europe’s problems too is the awkward and unclear path the United Kingdom will take to leave the European Union.

“There are a lot of moving parts,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. Chandler said the ECB will also lower its inflation forecast.

“Every time the ECB met this year, the euro has fallen, except in September, and that’s probably because at every meeting, the economy’s been weakening,” said Chandler. He said the market is looking for clarity on when the ECB plans to raise rates and how it plans to handle its balance sheet as debt rolls off. One option would be to extend the maturities of some debt, like Italy or France, he added.

“Draghi is going to say monetary policy needs to remain very accommodative,” said Chandler, adding the ECB president may also say risks remain balanced because of labor market strength.

“Draghi is pinning his hopes on their labor market,” Chandler said.

Europe’s low yields have made U.S. yields more attractive to some investors, and the spread between the German 10-year bund and the U.S. 10-year yield is the widest in decades. The German bund yield Wednesday was about 0.28 to the U.S. yield of 2.91 percent.

ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was higher at around 2.8611 percent, while the yield on the 30-year Treasury bond was also higher at 3.1450 percent. Investors are increasingly concerned about a possible economic slowdown, shortly after the U.S., China and Japan all reported weaker-than-expected economic data. Meanwhile, the U.S. Treasury is set to auction $39 billion in 13-week bills and $36 billion in 26-week bills on Monday. In energy marke

At around 5 a.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was higher at around 2.8611 percent, while the yield on the 30-year Treasury bond was also higher at 3.1450 percent.

Investors are increasingly concerned about a possible economic slowdown, shortly after the U.S., China and Japan all reported weaker-than-expected economic data. It comes after Wall Street’s main indexes closed more than 2 percent lower on Friday, registering their largest weekly percentage declines since March.

On the data front, investors are likely to closely monitor the release of October’s Job Openings and Labor Turnover Survey (JOLTS) at around 10 a.m. ET.

Meanwhile, the U.S. Treasury is set to auction $39 billion in 13-week bills and $36 billion in 26-week bills on Monday.

In energy markets, crude prices were mixed after OPEC and allied non-OPEC oil producers agreed to implement a supply cut from January. Despite the news, the price outlook for 2019 remains uncertain on the back of an economic slowdown.

International benchmark Brent crude traded at around $61.66 on Monday, up around 0.05 percent, while U.S. West Texas Intermediate (WTI) stood at around $52.40, more than 0.4 percent lower.

News of Meng’s arrest broke last week and is reportedly related to possible violations of U.S. sanctions. The arrest is seen as a potential deterrent to the U.S. and China reaching a permanent deal on trade. Huawei is one of the largest tech companies in China and is seen as symbol of pride by the Chinese government. On Dec. 1, President Donald Trump and Chinese President Xi Jinping agreed to a 90-day truce on the countries’ trade spat. He added that additional tariffs will be placed on Chinese

News of Meng’s arrest broke last week and is reportedly related to possible violations of U.S. sanctions. The arrest is seen as a potential deterrent to the U.S. and China reaching a permanent deal on trade. Huawei is one of the largest tech companies in China and is seen as symbol of pride by the Chinese government. Meng is scheduled to appear at a bail hearing in Canada later on Monday.

Monday’s moves come after a volatile week for investors. The Dow, S&P 500 and Nasdaq Composite all posted their worst weekly performances since March last week, falling more than 4 percent each, as worries and confusion about the ongoing U.S.-China trade war and fears of an economic slowdown gripped Wall Street.

“The volatility continues,” said Mark Newton, managing member at Newton Advisors, in a note to clients. “Stocks reversed the prior week’s rally violently over the last few days, and now have reached the bottom of the recent trading consolidation that’s been in place for the past few months.”

“Seeing a larger breakdown in the indices at this point would confirm that stocks have definitely started a larger correction that should eventually lead to a bear market,” he said.

On Dec. 1, President Donald Trump and Chinese President Xi Jinping agreed to a 90-day truce on the countries’ trade spat. Both leaders agreed not to slap additional tariffs on billions of dollars worth of goods from their countries. It was not immediately clear, however, when the truce started as administration officials disagreed on the matter. Trump later said on Twitter the cease-fire began on Saturday, when he and Xi struck the deal.

The mixed messages did not stop there, however. National Economic Council Director Larry Kudlow told CNBC on Friday that Trump would extend the 90-day grace period if progress in the negotiations was made but a permanent deal could not be reached. Later that day, trade advisor Peter Navarro told CNN that Trump would “simply raise” tariffs on Chinese goods if a permanent deal was not struck after the 90 days.

U.S. Trade Representative Robert Lighthizer warned on Sunday he considers March 1 — when the truce is scheduled to end — as “a hard deadline.” He added that additional tariffs will be placed on Chinese goods if a deal is not reached by then.

Meanwhile, the 3-year Treasury note yield broke above its 5-year counterpart last week. This “yield-curve inversion” stoked fears that a recession could be on its way. Still, many traders believe the inversion won’t be official until the 2-year yield rises above the 10-year yield, which has not happened yet.

Strategists at MRB Partners think investors might be overreacting to the moves in Treasury yields. “Markets are now discounting greater weakness than we expect next year,” they said in a note. “Our neutral stance on equities and underweight on fixed income corresponds with our expectation that stocks will outperform bonds in the year ahead, albeit in choppy fashion.”

The dollar fell against the yen on Thursday as growing investor aversion to riskier assets hit equities and pushed down U.S. Treasury yields. Global equity markets have been shaken and the dollar fell this week after an inversion in a part of the U.S. Treasury yield curve triggered market concerns about economic growth. U.S. Treasury yields fell, pressuring the dollar. “Lower Treasury yields are driving the dollar lower against the yen. The euro lost 0.42 percent to 127.85 yen, the Australian do

The dollar fell against the yen on Thursday as growing investor aversion to riskier assets hit equities and pushed down U.S. Treasury yields.

The U.S. currency dropped 0.45 percent to 112.68 yen, handing back its modest gains made overnight.

Global equity markets have been shaken and the dollar fell this week after an inversion in a part of the U.S. Treasury yield curve triggered market concerns about economic growth.

Adding to the jitters on Thursday was the arrest in Canada of a top executive of Chinese tech giant Huawei Technologies, fanning fears of a flare-up in tensions between China and the United States just as the two sides are supposed to be resuming trade negotiations.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.93 percent and Japan’s Nikkei lost more than 2 percent.

U.S. Treasury yields fell, pressuring the dollar.

“Lower Treasury yields are driving the dollar lower against the yen. It is difficult to pinpoint how much funds investors have transferred from equities to bonds in the recent risk aversion and it is too early to call a bottom for Treasury yields,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

The 10-year Treasury yield last stood at 2.8829 percent.

Signals from the Federal Reserve last week that it may be nearing an end to its three-year rate hiking cycle have helped trigger the slide in Treasury yields.

The spread between the two-year and five-year Treasury yields inverted this week and the two-year/10-year spread was at its flattest in more than a decade amid a sharp fall in long-term rates.

A flatter curve is seen as an indicator of a slowing economy, with lower longer-dated yields suggesting a potential recession down the road.

“The dollar could remain under pressure until this month’s Fed meeting as long-term Treasury yields may not be able to mount a rebound until the market sees the Fed’s stance on policy and the economy,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

“The recent reaction to the U.S. yield curve inversion appears a little hysterical, but the dollar will not be given the all clear sign until the Fed meeting is hurdled.”

Fed policymakers are still widely expected to raise interest rates again at their Dec 18-19 meeting, but the market focus is on how many rate hikes will follow in 2019.

The yen, often sought in times of market unrest, made strides against other peers as well.

The euro lost 0.42 percent to 127.85 yen, the Australian dollar slumped 1.02 percent to 81.44 yen and the pound fell 0.55 percent to 143.33 yen.

The euro was little changed at $1.1346 after retreating from this week’s high of $1.1419 scaled on Tuesday.

The Australian dollar, sensitive to swings in risk sentiment, was down 0.58 percent at $0.7226.

The Aussie was already on a shaky footing after shedding nearly 1 percent the previous day on weaker-than-expected third quarter Australian gross domestic product data.

The pound was a shade lower at $1.2723.

Sterling had sunk to a 17-month low of $1.2659 at one point on Tuesday after parliamentary setbacks for Prime Minister Theresa May.

The yield curve has flattened to its lowest level since June 2007 with the 10-year Treasury note yield only around 10 basis points above the 2-year note. “The yield curve has almost always forecasted the direction of trend growth, meaning when the curve flattens, growth with a lag tends to slow and vice versa when the curve steepens,” LaVorgna told CNBC’s “Trading Nation” on Tuesday. The yield curve inverts when shorter-term Treasurys yield more than longer-term Treasury yields. Still, while the

One key recession indicator is flashing a warning signal to investors.

The yield curve has flattened to its lowest level since June 2007 with the 10-year Treasury note yield only around 10 basis points above the 2-year note.

Joseph LaVorgna, chief economist of the Americas at Natixis, says the move has him “very worried” about what comes next.

“The yield curve has almost always forecasted the direction of trend growth, meaning when the curve flattens, growth with a lag tends to slow and vice versa when the curve steepens,” LaVorgna told CNBC’s “Trading Nation” on Tuesday.

The yield curve inverts when shorter-term Treasurys yield more than longer-term Treasury yields. The relationship between the 2-year and 10-year yields is often used as a barometer of investor expectations for economic growth.

Still, while the flattening yield curve is cause for concern, it’s not yet time to panic, says LaVorgna.

“Typically the 2s/10s has roughly a 16-month lead from when it inverts to a recession and it could be even longer than that,” he said. “Much will depend on what the Fed does.”

The Federal Reserve’s rate moves tend to influence the short-end of the curve, including the 2-year Treasury yield, more quickly. Expectations of a hawkish Fed that hikes too aggressively could tip the short end of the curve higher than the long end.

“If the Fed relents later this month and takes off some of those dots, it takes away some of those aggressive rate-hike projections, the yield curve will then stop flattening, it might steepen out a bit, and that would be a sign the economy, at least in the markets’ mind, has some more room to run,” LaVorgna said.

The Fed is widely expected to raise interest rates at its meeting on Dec. 18-19. Fed members will also release their dot-plot projections, which could ease concerns over how aggressively the central bank will move next year.

“Nothing is preordained. The curve isn’t saying there’s a recession imminently. It says that one is going to happen at some point on the horizon. What the Fed does from here, though, will be central to whether those market fears are realized,” he said.